The equity ratio is a business ratio that indicates the percentage of a company's total capital that is financed by equity - i.e. its own funds - or how well it is financed. Liquidity is ordered.
The equity ratio shows how independent a company is from Debt capital is. If you have a lot of equity, you need fewer loans. This means more security for creditors, a better negotiating position with banks and a lower risk of insolvency.
Equity ratio = (equity / total capital) × 100
Equity: z.e.g. subscribed capital, reserves, retained earnings
Total capital: Equity + borrowed capital (e.g. loans, liabilities)
In SAP Business One The equity ratio is derived from the data of the balance sheet structure, which is calculated using the finance can be analysed. The underlying values - equity and total assets - can be determined via the balance sheet reports or individual financial reports (e.g. financial ratio analysis). The prerequisite is a properly maintained and structured chart of accounts in which equity and liabilities are correctly allocated. Special valuation requirements can be met by add-ons such as the Versino Financial Suite that enable advanced financial analyses.
This key figure is not calculated automatically, but can easily be generated in user-defined analyses or external tools based on the exported SAP data.
Significance for the company:
- > 30 %: Very solid, high level of trust from investors
- 20 - 30 %: Healthy, stable capital base
- < 20 %: Critical, high debt capital risk
However, the valuation depends heavily on Industrybusiness model and investment intensity.
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